Q2. (25 marks) Rom Seal company manufactures household items sold at trade shows. The items, classified as either Tables or Frames, are manufactured on a common assembly line. Although different direct materials are used, the direct labour cost is the same for each product line. The plant-wide rate for allocating manufacturing overhead to its products is no longer acceptable. The production manager has heard about activity-based costing and has assembled some information for use in changing the cost system to a cost driver concept. With the help of the accounting department, the manager has been able to establish the following relationships between production costs and some of the indirect manufacturing activities for July, along with the production data for the two product lines: Activity Cost Driver Allocation Rate Tables Frames Material Number of parts $1.00 per part handling 2000 1900 Machining Machine hours $15.00 per hour 205 300 Assembly Units began $1.60 per unit 1000 1300 Inspection Number tested $2.00 per unit 100 1200 Direct costs: Labour Materials Tables $12,000 $5,200 Frames $12,000 $2,600 Focus States Styles 1300 handling Machining Assembly Inspection Machine hours Units began Number tested $15.00 per hour $1.60 per unit $2.00 per unit 2000 205 1000 300 1300 1200 100 Direct costs: Frames Labour Materials Tables $12,000 $5,200 $12,000 $2,600 Required: Using activity-based costing determine the total production cost of each of the two product lines for July and the cost per unit assuming all units started were completed. 1 Tables Frames $12,000 $12,000 Direct Manufacturing Costs Direct labour Direct materials Total direct costs 5,200 2,600 17,200 14,600 Focus